On 5 November 2018, Miclyn Express Offshore (MEO) filed for bankruptcy protection with the Singapore High Court. The company is a Singapore-headquartered provider of support vessels and project transportation solutions to the offshore oil and gas industry, and was bought by Champ Private Equity firm in October 2012, as Champ’s website notes.
In 2014, MEO was on the Forbes list of “Asia’s 200 best under a billion”, but the company has suffered from the cutbacks to oil and gas services as the oil price has continued to remain subdued.
MEO is not alone. According to the Singapore paper, the Business Times, the six largest Singaporean offshore oil & gas service companies owe more than US$3.5bn on a pro forma combined US$200m EBITDA.
Recent results
MEO’s unaudited revenue according to its most recent results were US$138.8m for FY18 (to 30 June) vs US$173.8m in FY17, with normalised EBITDA of US$23.4m in FY18 vs US$47.2m in the prior year. Actual EBITDA was US$(12.1)m vs US$(19.6)m in FY17. Utilisation of its offshore support vessels was at 64% in the 2HFY18 vs 70% in 2HFY17. The company reported in its outlook that “oversupply prevalent in most geographies” and noticeably did not report debt levels, only that US$10.1m cash remained at the end of FY18.
Capital structure
MEO’s total liabilities at 31 December 2017 (the last reported date) were US$543.6m:
- 150m 8.75% senior secured guaranteed bonds due 25 Nov 2018: 148.6m
- term loan due 2019: 11.9m
- term loan due Nov 2020: 230.1m
- revolving credit facility due Nov 2020: 68.3m
- trade and other payables: 77.2m
- tax liabilities: 7.5m
Compared to a reported asset base of US$747m, the liabilities look well covered. But one must query what value the US$451.9m book value PP&E figure will obtain given that this is primarily ships and service vehicles that are still in oversupply in the Singaporean market.
Kirkland & Ellis and Wong Partnership are representing MEO. The bondholders have recently organised with nTan Financial Advisory, KordaMentha and BlackOak LLC advising them as they object to the moratorium sought by MEO under s211(b) of the Singapore Companies Act. The US$150m bonds were indicated at 30 bid as of 23 November according to REDD Intelligence.
This filing is an interesting development of the Singaporean restructuring regime and will no doubt further develop that jurisdiction as the potential restructuring hub of Asia.
From speaking to a few experts, it seems that the current key drawbacks with the regime are:
- lack of disclosure regime, particularly as compared with US Chapter 11 (on which the Singapore regime is modelled). This means creditors are left in the dark. On the basis of the adage that ‘sunlight is the best disinfectant’, this seems problematic.
- lack of shareholder cramdown. This means it is junior debtholders who are most likely to lose out. This makes little sense in the context of allocating risk, and undermines the absolute priority rule.
We will continue to follow and report further on the bits that may be found at the bottom of this moat.
Nothing in the above is to be construed as investment advice.
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